Accounting for Bond Maturities in Fixed-Income Strategy Backtests

Summary

The document asks how to handle bonds that mature while backtesting a fixed-income portfolio strategy, particularly when trying to reproduce a published study. It focuses on how a maturing bond contributes to returns and how the portfolio should account for new bonds entering the index or strategy universe.

No answer, methodology, or empirical evidence is included, so the question remains unresolved in the source. A backtest must define what happens to principal at maturity and how holdings are replenished, but the excerpt does not specify an index methodology, trading assumptions, transaction costs, or reinvestment rules. Those choices can affect measured portfolio returns and comparability with the paper being replicated.

Key ideas

• The source asks how bond maturities should be represented in a fixed-income backtest.
• A backtest needs a rule for the principal returned when a bond matures.
• It also raises how newly eligible bonds enter the portfolio or index during the study.
• No methodology or answer is provided, and reinvestment and trading assumptions remain unspecified.

Tags

# Back testing fixed income for bond portfolio management


# Back testing fixed income for bond portfolio management












When doing back test trying to replicate a paper, how do you handle bonds that are maturing in an index?

Say I was trying to create a strategy, how do I account for bonds that mature in terms of return.

This question might be vague, thinking about it. But just wondering how authors considers bonds that mature and how the addition of bonds affect their study.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.